For Lawyers Turned Video-Porn Mass Copyright Plaintiffs, Litigation May Not Pay

by Lee Gesmer on May 10, 2013

For Lawyers Turned Video-Porn Mass Copyright Plaintiffs, Litigation May Not Pay

I didn’t think I’d have a chance to write another “what were they thinking” post only two weeks after the last one. But, here goes ….

I’ve written about Bittorrent swarm mass copyright suits in the past, but Monday’s decision by California federal district court judge Otis D. Wright tops everything that has come before. A lot of people have followed this case and similar cases filed by so-called “Prenda Law”Ingenuity 13 v. John Doe. In other words, the plaintiffs in this case have made a lot of people mad.*

*Techdirt is at or near the top of this lengthy list.

The Ingenuity 13 case has been dismissed, but on Tuesday the judge issued a withering sanctions decision in the case. Here is some of what he had to say.

The opening paragraph of the opinion sets the stage for the indictment that follows:

Plaintiffs have outmaneuvered the legal system. They’ve discovered the nexus of antiquated copyright laws, paralyzing social stigma, and unaffordable defense costs. And they exploit this anomaly by accusing individuals of illegally downloading a single pornographic video. Then they offer to settle—for a sum calculated to be just below the cost of a bare-bones defense. For these individuals, resistance is futile; most reluctantly pay rather than have their names associated with illegally downloading porn. So now, copyright laws originally designed to compensate starving artists allow, starving attorneys in this electronic-media era to plunder the citizenry.

Their litigation strategy consisted of monitoring BitTorrent download activity of their copyrighted pornographic movies, recording IP addresses of the computers downloading the movies, filing suit in federal court to subpoena Internet Service Providers (“ISPs”) for the identity of the subscribers to these IP addresses, and sending cease-and-desist letters to the subscribers, offering to settle each copyright infringement claim for about $4,000. …

After that dramatic introduction Judge Wright introduces the actors in the “porno-trolling collective,” and introduces their modus operandi:

Steele, Hansmeier, and Duffy (“Principals”) are attorneys with shattered law practices. Seeking easy money, they conspired to operate this enterprise and formed the AF Holdings and Ingenuity 13 entities (among other fungible entities) for the sole purpose of litigating copyright-infringement lawsuits. They created these entities to shield the Principals from potential liability and to give an appearance of legitimacy. … The Principals’ web of disinformation is so vast that the Principals cannot keep track—their explanations of their operations, relationships, and financial interests constantly vary. …

The opinion then presents the following graphic, in an attempt to untangle the “web of disinformation” (an enlarged version of this graphic appears in the opinion):

graphic

Incredibly, since 2010 this strategy has resulted in gross settlements approaching $15 million:

This nationwide strategy was highly successful because of statutory copyright damages, the pornographic subject matter, and the high cost of litigation. Most defendants settled with the Principals, resulting in proceeds of millions of dollars due to the numerosity of defendants. …

However, there was one small problem with these cases. It appears that the plaintiff forged the copyright assignment to one of the porn films:

The Principals stole the identity of Alan Cooper (of 2170 Highway 47 North, Isle, MN 56342). The Principals fraudulently signed the copyright assignment for [porn movie] “Popular Demand” using Alan Cooper’s signature without his authorization, holding him out to be an officer of AF Holdings. …

Every conspiracy needs a henchman, and in this story it is attorney Brett Gibbs:

The Principals ordered [attorney] Gibbs to commit the following acts before this Court: file copyright-infringement complaints based on a single snapshot of Internet activity; name individuals as defendants based on a statistical guess; and assert a copyright assignment with a fraudulent signature. The Principals also instructed [attorney] Gibbs to prosecute these lawsuits only if they remained profitable; and to dismiss them otherwise. …

. . . [attorney] Gibbs, even in the face of sanctions, continued to make factual misrepresentions to the Court.

The judge then assesses sanctions, the least of which is the approximately $40,000 in attorney’s fees which he doubled to over $83,000:

The Principals, AF Holdings, Ingenuity 13, Prenda Law, and [attorney] Gibbs are liable for [over $83,000 in attorney’s fees] jointly and severally, and shall pay this sum within 14 days of this order. …

[T]here is little doubt that that [attorneys] Steele, Hansmeier, Duffy, Gibbs suffer from a form of moral turpitude unbecoming of an officer of the court. To this end, the Court will refer them to their respective state and federal bars.

The Court will refer this matter to the United States Attorney for the Central District of California. The will also refer this matter to the Criminal Investigation Division of the Internal Revenue Service and will notify all judges before whom these attorneys have pending cases. For the sake of completeness, the Court requests Pietz to assist by filing a report, within 14 days, containing contact information for: (1) every bar (state and federal) where these attorneys are admitted to practice; and (2) every judge before whom these attorneys have pending cases. …

Ouch! A few weeks ago I posted about at case in which defendants angered a Massachusetts federal district court judge (“What Happens When You Get a Federal District Court Judge Really, Really Mad”). The California judge in the Ingenuity 13 case showed that, by comparison, the Massachusetts judge was throwing cotton balls.

Seriously, theses lawyers are in big trouble with the IRS (apparently they didn’t report their settlements as income), the courts and, worst for them, the U.S. Attorney’s Office. Since lawyers from the U.S. Attorney’s Office are the prosecutors that appear before federal judges, they are unlikely to disregard a federal judge’s request that they conduct an investigation to determine whether there are grounds for criminal prosecution.

What were they thinking?

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